Life Log

It’s Highly Probable That ACA Cut Bankruptcies in Half.

Tobias S. Buckell

Yesterday I posted a link to a Consumer Reports article that suggested that the implementation of ACA likely cut US bankruptcies half.

I posted the following tweet:

That leads to a Consumer Reports article that has this chart of consumer bankruptcies:

And the internet blew up for me. At first I was impressed with the clip of retweets, over a couple hours the tweet hit a few hundred retweets. Which is about as far as a tweet of mine has ever gone.

Logged back in after dinner and I’d crossed a thousand retweets and climbing rapidly.
That was when I realized the damn tweet had gone viral. Right now it’s near 7,500 retweets and I’ve lost a lot of time trying to filter through angry responses and have read a lot of truly devastating stories of people summarizing their own bankruptcies due to medical debt.
People that I watch on TV or follow online have retweeted me, which is a surreal experience (geek squee when Adam Savage retweets you, right?), and I’ve had the opportunity to mute all sorts of new and exciting people who are really ANGRY with me. Not angry, but ANGRY. That special kind of online anger that REQUIRES ALL CAPS.

There have been basically two ANGRY replies to my tweet. They break down to positions:

1) You’re cheating by showing a shorter date range of 2010-2017, try 2007-2017 instead, it totally proves you’re wrong

Here’s it is more politely expressed by Twitter user @weel than by the many, many, MANY folk after him:

To be utterly honest, when I read Consumer Reports articles, I didn’t spot the 2010-2017 framing, and I can see why that would look like axis manipulation. I’ll give the opposition that. And the first thing you find if you hunt for a larger bankruptcy date range, are graphics from the American Bankruptcy Institute that seem to disagree. Take a look:

What a look at bankruptcies from 2007 looks like is that bankruptcies climbed up because of a big event. We know that 2008 and onward was the financial crisis, so it wouldn’t seem a big leap to pair those up. Then the rate fell down. That seems like a very different story than CR reported.

I was accused of manipulating data and being a liberal stooge.
Okay.

But if starting the axis from 2010 is manipulating data, then why does the ABI start its data at 2007?

See, because I considered personal bankruptcy in the eye due to overwhelming medical bills in 2008 and I did some research back then. I found out that the bankruptcy laws changed dramatically for 2006 onward due to legal changes championed by Republicans who saw consumers as skipping out on too many of their debts and hurting debtors.

The 2005 changes in the bankruptcy law had a dramatic impact on bankruptcy, and were major headlines back then. How soon we forget.

Q: What is the new bankruptcy law, and when did it take effect?
A: The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, a major reform of the bankruptcy system, was passed by Congress and signed into law by President Bush in April 2005. Bankruptcy was reformed in a number of ways, including tighter eligibility requirements. The majority of changes instituted by this new law took effect on October 17, 2005 (180 days after the law was signed), although a few changes took effect immediately after the legislation was signed by the President.

So, let’s look at bankruptcy before 2007 and see what our chart looks like:

Oh dear.

2006 and 2007 were the lowest years of bankruptcy on record because the Bush Administration sided with debtors complaining about the fact that bankruptcies reached a high of 2.1 million bankruptcies. The Bush administration was able to artificially reduce bankruptcies quickly, but they didn’t go after the root cause, but merely made it harder to declare bankruptcy. With a stroke of a pen, they cut bankruptcies. But after that they pop right back up again.

But it’s quite clear that throughout the 90s bankruptcies were rising steadily as well. And after a couple years of the new bankruptcy laws, the rate of bankruptcies began to return to right where they were prior to the late 2005 law to make it harder.

Then, in 2010, it abruptly and dramatically reverses.

The question is why the inexorable march upward?

Well, as many angry GOP twitter folk noted, ‘how can we ever know how many of those bankruptcies are medical?’

We don’t know for sure, but there is research and data. A commonly accepted amount among many folk in the industry is simply ‘more than half.’ Consumer Reports, who are well known for their digging around to focus on just data, also had a rate of roughly half.

Snopes dug into it and found some studies that went as low as 18-25% of bankruptcies being medical in 2015 (after ACA went into affect).

So, there are studies that show somewhere between 62% prior to ACA and as little as 25% post ACA are US bankruptcies related to medical debt pressure.

2) Correlation doesn’t imply causation!


Well sure, aren’t you clever. This, after complaints about the axis, was the next ‘zinger’ that everyone deployed to make my uncomfortable retweet go away.

So, just as the same time, The Oatmeal posted this awesome comic called “You’re Not Going to Believe What I’m About to Tell You:”

It’s about the BackFire Effect, where people who believe something deeply will see someone like me posting charts and data and that makes them twice (!) as likely to insist on believing what they believe and dismissing evidence. It’s why facts don’t win arguments.

So, sure. I can point to that chart that shows the inexorable march of bankruptcies up to 2.1 million, the temporary dip down to 600,000 bankruptcies due to a GOP rules change to make them harder, and then the fact that the line pops right back up. Then, in 2010, it reverses.

I can point out that the dip in 2006 was only for two years, but the dip since 2010 has show a 7 year strength in it.

All of those indicate a stronger case for my narrative: that what we’ve been doing for the past 7 years is dramatically reducing bankruptcies.

In fact, I’d argue the bankruptcy rate was climbing to get right back to its natural 2.1 million a year that it hit in 2005 and ACA didn’t just likely halve it, but prevented a shit ton of oncoming bankruptcies.

But, sarcastically, sure, dismiss it all out of hand because it makes you angry.
It doesn’t make that chart go away though. In fact, having looked into the data deeper, worried that I would have to issue a mea culpa, it looks rather likely that bankruptcies on that chart from 2006 to 2010 were rising faster than they had been previously. They freaking tripled in 4 years!

And if most bankruptcy is medical, than rather than saying ‘correlation isn’t causation’ please, one of you, for the love of anything, please explain what halted a 100% a year runaway bankruptcy growth and reversed almost as dramatically? Because so far everyone tossing that phrase out there just runs away and doesn’t offer up a counter-theory.

3) I shouldn’t have to pay for other’s medical expenses

Though a lot of people have explained that they shouldn’t ‘have to pay for other’s medical expenses.’

Now we’re at least being honest, because that isn’t arguing about whether bankruptcies are being dramatically cut. The idea of socially pooling costs upsets you. Never mind that we do that for fire, police, etc, it’s a fundamental issue.

Buddy, welcome to being part of a civilization. I pay for your military defense out of my taxes. We pay for other people’s house fires to get put out. Ever been in a car accident? I haven’t, but my money pools in to pay. That’s how insurance works. We all pool in.

And you don’t have a choice in that. You haven’t since Ronald Regan passed EMTALA, a law that made it illegal for emergency rooms to turn down medical care. That socialized US medicine. What we’re arguing about since then is how to pay for it as a society because people refuse to approach it like any other society with good health and riches has.

And yes, ACA still cut bankruptcies.

Published by Tobias S. Buckell

Born in the Caribbean, Tobias S. Buckell is a New York Times Bestselling author. His novels and over seventy stories have been translated into nineteen different languages. He has been nominated for the Hugo, Nebula, and John W. Campbell Award for Best New Science Fiction Author. He currently lives in Ohio.

4 thoughts on “It’s Highly Probable That ACA Cut Bankruptcies in Half.”

  1. Excellent post. The bankruptcy law changes in 2005 were my first counter-thought to the people countering you with the short date range. Thanks for finding and researching.

    1. I’m a bit distressed about how few people know about the bankruptcy law changes.

  2. One other point with respect to your point #3 about not paying for other’s health care expenses. I hate to tell everyone, but when someone files bankruptcy because of medical bills, the rest of us are paying for those medical costs. The debtors may no longer owe those amounts, but the health care providers collect that lost money from somewhere. That somewhere is from everyone else who pays their healthcare bills. In addition, however, the rest of us are also paying for their mortgage, their credit card bills, their car loans, and every other debt that they defaulted on.
    There really is a ripple effect here and, as a group, we are all better off with fewer bankruptcies because that means fewer debts that are written off, which means fewer debts the rest of us pay for. Please note here, that I am talking about fewer actual bankruptcies, not the artificially low number of bankruptcies that were created by the “bankruptcy reform” law.
    In sum, I think you are right. It looks like ACA reduced the number of bankruptcies. This is good for all of us.

    1. This.
      Out of curiosity, would the medical side of this be resolved if hospitals were allowed to deny care if you don’t have insurance and/or cannot afford the care? Or would that end up rolling back into medical costs somehow anyway?
      Basically, trying to figure out just how interconnected this all is. I’m in no way suggesting we keep going backwards (god no)…

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